Information bubbles; the market for financial information and the railway mania of 1845

This thesis studies the railway mania of 1845 and the role of the financial press in contributing to the bubble in railway equity. By constructing a new database of railway companies, this thesis demonstrates how the bubble prompted the creation of low-quality and fraudulent railway companies. Drawing on a combination of legal history and modern statistical methods, the thesis reveals the techniques used to defraud investors during the railway mania and provides new estimates of the prevalence of fraud during the mania – overturning the current scholarly consensus. Building on the evidence of large numbers of fraudulent companies, the thesis explains the success of these companies in finding investors by focusing on the role of the financial press. The links between company promotion and the press are elucidated by showing how the media market responded to the mania for company promotion with a proliferation of start-up finance journals that were created to help market railway stock. In the aftermath of the mania the market for information re-adjusted, with the newspapers that profited most from the mania being punished through a loss of market-share and the newspapers created to promote railway companies going out of business. The thesis offers a framework within which to understand the links between bubbles and the financial press and offers important revisions to the way we understand the railway mania.